— Business & Valuation
MIRR Calculator
Calculate modified internal rate of return using explicit finance and reinvestment rates. Compare MIRR with IRR, see present value of negative flows, future value of positive flows, and the single realistic return.
MIRR
18.98%
- Decision
- Accept
- IRR (for contrast)
- 25.75%
- FV of inflows (at terminal)
- $238,408
- PV of outflows (today)
- $100,000
Try: MIRR vs IRR, Lower reinvestment, Sign change (IRR breaks), Below the hurdle
— How MIRR works, period by period
| Year | Cash flow | Compounded to terminal | Discounted to present |
|---|---|---|---|
| 0 | $-100,000 | $100,000 | |
| 1 | $30,000 | $43,923 | |
| 2 | $35,000 | $46,585 | |
| 3 | $40,000 | $48,400 | |
| 4 | $45,000 | $49,500 | |
| 5 | $50,000 | $50,000 | |
| Total | $238,408 | $100,000 |
— MIRR versus IRR
| Measure | Rate | Reinvestment assumption |
|---|---|---|
| MIRR | 18.98% | Inflows at 10% (realistic) |
| IRR | 25.75% | Inflows at 25.75% (the IRR itself) |
| Gap (IRR − MIRR) | 6.77% | How much IRR’s assumption flatters the return |
— How MIRR works
Download— How it works
MIRR = ( FV of positive flows at the reinvestment rate ÷ PV of negative flows at the finance rate )^(1 ÷ n) − 1, where n is the number of periods.
Why MIRR exists
IRR is the rate that sets a project’s NPV to zero, and it’s genuinely useful — but it carries a built-in assumption that quietly inflates it: that every cash flow the project throws off is reinvested at the IRR. A project earning a 25% IRR is assumed to reinvest its interim cash at 25%, year after year. In reality you reinvest at something closer to your cost of capital. MIRR replaces the fiction with two explicit rates: a reinvestment rate for the cash that comes in, and a finance rate for the cash that goes out. It compounds the inflows forward to a single terminal value and discounts the outflows to a single present value, then solves for the one rate that connects them. Because the reinvestment rate is usually well below the IRR, the MIRR is usually lower — and more honest.
Worked example — invest 100,000, receive 30k / 35k / 40k / 45k / 50k over five years, both rates 10%: Inflows compound forward to a terminal value of about 238,000; the outflow’s present value is 100,000. MIRR = (238,000 ÷ 100,000)^(1/5) − 1 ≈ 19% — against an IRR of about 25.75%. The 6.8-point gap is IRR’s reinvestment assumption.
Reading MIRR against IRR
This calculator always shows both, because the comparison is the lesson. When the reinvestment rate is below the IRR — almost always — the MIRR sits below the IRR, and the gap measures how much IRR’s optimistic assumption flatters the project. Set the reinvestment rate equal to the IRR and the two converge, which is the clearest way to see what IRR is silently assuming. For ranking competing projects, MIRR is the fairer measure: it puts every project on the same realistic reinvestment footing, whereas IRR rewards projects that return cash early on the false premise that the cash keeps earning the IRR. Use the MIRR for the decision and the IRR for context.
MIRR’s second advantage: one answer, always
IRR has a structural weakness beyond the reinvestment assumption: when a cash-flow stream changes sign more than once — an outflow, inflows, then another large outflow — the NPV equation can have several solutions, or none, and IRR becomes ambiguous or undefined. MIRR has no such problem. Because it collapses all the positives into one future value and all the negatives into one present value before solving, it always returns a single, well-defined rate, whatever the sign pattern. The calculator flags when your stream changes sign more than once so you can see exactly where IRR would struggle and MIRR wouldn’t. Educational tool only — not investment advice; MIRR is only as good as the reinvestment and finance rates you assume, so choose them with care.
— Reader questions
What is the difference between MIRR and IRR?
IRR assumes interim cash flows are reinvested at the IRR itself; MIRR lets you set a realistic reinvestment rate (and a separate finance rate for outflows). Because the reinvestment rate is usually lower than the IRR, MIRR is usually lower and more realistic. MIRR also always gives a single answer, while IRR can have multiple values or none for sign-changing streams.
Why is MIRR usually lower than IRR?
Because IRR assumes you reinvest interim cash flows at the (high) IRR, while MIRR assumes you reinvest them at a more modest, realistic rate. Earning less on the reinvested cash produces a lower overall return, so MIRR comes in below IRR. The two are equal only when the reinvestment rate is set exactly to the IRR.
What reinvestment and finance rates should I use?
The reinvestment rate should reflect what you can realistically earn on cash the project returns — often your cost of capital or a safe benchmark return. The finance rate should reflect your cost of capital for funding the outflows. Many analysts simply use the cost of capital (WACC) for both, which is a reasonable default.
Why does MIRR always give a single answer?
Because it transforms the cash flows before solving: all positive flows are compounded into one terminal value and all negative flows discounted into one present value, leaving a simple two-point calculation. That structure has exactly one solution, regardless of how many times the original stream changes sign — unlike IRR, whose polynomial can have several roots.
When should I use MIRR instead of IRR?
Use MIRR when the reinvestment assumption matters — comparing projects with very different cash-flow timing, or any project whose IRR looks implausibly high — and whenever the cash-flow stream changes sign more than once, where IRR can be ambiguous. IRR remains a useful, widely-understood headline figure, so showing both (as this calculator does) is best practice.